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Advocates for bridging the digital divide are expressing cautious optimism as the Supreme Court signaled reluctance to dismantle the Universal Service Fund (USF) program. This initiative allocates approximately $9 billion annually to facilitate internet access and phone services for low-income and rural communities, as well as to support schools, libraries, and hospitals. The court’s apparent hesitation offers a reprieve for broadband subsidy programs aimed at promoting internet connectivity across the nation.
Supreme Court Appears Unlikely to Strike Down Universal Service Fund
Consumers’ Research, a conservative nonprofit organization, initiated legal action against the Federal Communications Commission (FCC) in 2022. This challenge gains salience amidst the current administration’s push for significant alterations to a $42 billion investment in rural broadband infrastructure. The Supreme Court’s verdict in the USF case could potentially disrupt broadband subsidies that have been in place for three decades.
Justices Kagan, Sotomayor, and Jackson, along with Justices Barrett and Kavanaugh, appeared unconvinced by arguments suggesting the program is illegitimate or lacks congressional oversight.
“If I were the government, I would feel pretty good right now,” remarked Adam Crews, a Rutgers law professor who previously represented the FCC. “It did not seem to me there were five votes in favor of upholding the Fifth Circuit’s decision,” Crews stated to FASTNET.
The USF has faced scrutiny from conservatives for some time. Project 2025, a conservative policy framework, includes proposals from FCC Commissioner Brendan Carr to replace the current funding mechanism, which relies on telecommunications companies, with contributions from Big Tech firms.
In 2023, Carr likened the FCC’s existing approach to “taxing horseshoes to pay for highways.”
However, whether Commissioner Carr remains interested in requiring technology companies to finance the USF remains uncertain.
“He has remained silent on this issue since the election,” noted Blair Levin, a former FCC chief of staff and telecom analyst at New Street Research, in a statement to FASTNET.
Court’s Reluctance to Overturn Internet Access Program
The legal brief submitted by Consumers’ Research portrayed the USF as an example of unchecked bureaucracy, where unelected officials impose taxes without proper limitations.
“Congress delegated its taxing authority to the FCC without clear or meaningful limits on the tax amount,” the brief argued. “The FCC operates based on its own ‘aspirations,’ and Congress further authorized the agency to expand its regulatory scope at its discretion.”
However, the justices largely dismissed this argument, challenging the notion that the program lacks constraints.
“The FCC’s actions through this program are essentially focused on providing internet services to those in rural areas or low-income individuals, ensuring they gain access comparable to the rest of the population,” Justice Kagan asserted.
Towards the conclusion of the arguments, Justice Alito, often considered a conservative voice, raised concerns regarding the practical consequences of a ruling against the USF.
“What would be the effect on people in rural areas if this is deemed unconstitutional and Congress fails to act?” Justice Alito inquired.
Despite expectations that Justice Alito might oppose the FCC, his questions suggested a degree of uncertainty.
“I found that very noteworthy, indicating that even if he is sympathetic to the opposing view, he might hesitate to invalidate the program,” remarked Professor Crews.
Perhaps more telling than the questions posed were those left unasked.
“The Chief Justice remained notably silent,” observed Professor Crews. “His silence suggests he is inclined to maintain the status quo.”
Understanding the Universal Service Fund
Review your phone bill and search for “Universal Service.” You will likely find a small charge associated with the program. The FCC collects these funds from telecommunications providers—not directly from consumers—though these companies typically pass the cost to their customers.
This practice constitutes the core of Consumers’ Research’s disagreement: they contend that the USF fee functions as a tax, an authority reserved solely for Congress.
“Petitioners argue that delegating control over a multi-billion-dollar social welfare program to agency bureaucrats is a significant overreach,” Consumers’ Research stated in its brief.
The central principle behind the USF case is “universal service.” The Communications Act of 1934 mandated that “all individuals in the United States should have access to rapid, efficient, nationwide communications services with sufficient facilities at reasonable rates.”
Amendments to the Communications Act in 1996 established the USF, an independent FCC program tasked with broadening universal service to include broadband internet alongside telephone services.
The USF supports four initiatives addressing different aspects of the digital divide: the Connect America Fund (rural areas), Lifeline (low-income users), E-Rate (schools and libraries), and the Rural Health Care Program. The Universal Service Administrative Company (USAC), a private nonprofit entity, manages the USF.
“Is overturning a 30-year-old program worthwhile for a theoretical concern?” questioned Levin. “This program enjoys broad support, notably among Republican constituents.”
Future Implications of the USF Case
Further developments in the USF case are unlikely until the Supreme Court releases its decision, expected by the end of June. If the Court’s ruling aligns with current indications, the program will likely continue to be funded through phone bill surcharges in the immediate future. However, sustaining internet subsidies via phone bill fees may prove unsustainable in the long run.
“The economic challenge of increasing funding demands against a diminishing revenue base has been recognized for at least two administrations, yet concrete solutions beyond congressional discussions remain absent,” Levin observed in a note to investors.
Should the Court determine the USF’s funding mechanism to be unlawful, various possibilities could emerge. The Court might grant Congress and the FCC time to revise the program or identify alternative funding sources.
“I believe they would,” suggested Levin. “Abruptly eliminating funding could lead to bankruptcy for numerous rural telephone companies.”